For many homebuyers, establishing credit came naturally once they began working, applied for a credit card, took out a car loan or paid back student loans. But what about potential homebuyers who don't have a credit score, either because they are averse to credit cards or have yet to build up a substantive credit history? Can they still apply for a mortgage?
The answer is yes, but "it's exceedingly difficult to obtain a mortgage without a credit score," says Tim Ross, president and CEO of Ross Mortgage Corp. in Royal Oak, Mich. "Lenders use automated underwriting systems that base a loan decision on certain criteria, including a credit score. But there are some nontraditional sources that can be used for credit verification."
Mortgage lenders typically require a credit score of at least 620 or 640 to even consider an applicant for a loan.
While most lenders require three or more sources of credit, Clint , a senior mortgage banker with XXXX says, "I've worked with borrowers who have a slim credit file and been able to get them approved for a loan. The first thing we look for would be 12 to 24 months of canceled checks or verification from a landlord of on-time rent payments."
Alternative sources of credit
Here are several other items that can be used for nontraditional credit verification, Ross says:
- Utility bills for gas, electricity or water, as long as they are paid separately from your monthly rent.
- Phone and cable bills.
- Car insurance, renters insurance, life insurance or medical insurance payments, if they are not paid by payroll deduction.
- Child care or school tuition payments.
No comments:
Post a Comment